After a string of strong quarters, Chipotle (CMG) investors are digesting third-quarter results that missed Wall Street’s revenue expectations.
The burrito chain reported revenue of $2.78 billion on Tuesday, up 13% from a year ago but below expectations of $2.82 billion, according to Bloomberg consensus data. Adjusted earnings per share were $0.27, up 17.4% from the same period last year and beating expectations of $0.25.
Same-store sales increased 6%, but fell short of expectations of 6.38%. Chipotle stock fell 5% after the market closed.
Interim CEO Scott Boatright said the company’s food, service and the return of smoked brisket have boosted check size, foot traffic and profits. Chipotle “is showing strength across all income groups, even in this competitive environment,” he said on an earnings call.
The company’s value proposition resonates with customers. The average price of a chicken burrito is less than $10, which Boatwright said is a 15% to 30% discount compared to Chipotle’s peer group.
The results come as investors await the appointment of a permanent CEO after former CEO Brian Nicol was taken over by Starbucks (SBUX) in August.
Wedbush analyst Nick Setian wrote in a note to clients that efforts to improve throughput, or speed of service, are paying off.
Adding the expo role (staff who helps speed up the bagging and payment process between the salsa station and the cash register) added an additional five orders per 15 minutes during the restaurant’s peak hours. Approximately 60% of facilities were able to staff their exhibition halls, up from 50% in the second quarter.
Boatwright said it’s possible to increase Chipotle’s peak-hour orders to 30 orders per 15 minutes from the current mid-20-minute rate. Five more orders within that period could increase sales by about 1%, Setian said.
The company is also testing tools to help with prep work, including a new produce slicer. Double-sided grills, which cook chicken and steak faster, will also be added to 74 more restaurants by the end of the month.
The company’s robot makeup line and guacamole-cooking robot Autocado, in collaboration with Hyphen, are currently being tested in restaurants in California. Boatwright said both are “highly customized technologies that have the potential to unlock significant futures.”
Chipotle ended the third quarter with 3,615 stores. It added 86 stores in the quarter, 73 of which included drive-thrus. The company expects to open 285 to 315 new stores this year and 315 to 345 in 2025, fewer than the 358 stores expected by Wall Street.
In the long term, the company plans to operate 7,000 restaurants in North America. As our business has grown, we have invested in promoting staff from within.
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A jobs sign is seen in the window of a Chipotle store in New York City on August 2, 2024. (Michael M. Santiago/Getty Images) · Michael M. Santiago via Getty Images
TD Cowen analyst Andrew Charles wrote in a note to clients before earnings that Wall Street is also keeping an eye on ongoing raw materials inflation that could justify further price increases in the fourth quarter. There is.
Food, beverage and packaging costs rose nearly 30% from a year ago due to higher prices for avocados and dairy products. Additionally, the company said it had “increased ingredient usage” in the quarter after “focusing on ensuring consistently generous portions.” The company said this was partially offset by menu price increases last year.
Labor costs accounted for nearly 25% of total revenue, similar to last year. The company said the “benefit from sales leverage was primarily offset by higher wages for restaurants in California” following the enactment of the state’s fast food minimum wage law.
Many on Wall Street expect Mr. Boatwright to be named CEO permanently. He joined Chipotle as COO in 2017 after 10 years at Arby’s.
If he takes the top spot, Chipotle will likely follow suit.
“We are a fast-growing organization, both in same-restaurant sales and new restaurant development, and we are driven by a purposeful, passionate approach to achieving our long-term goals,” he told Yahoo Finance shortly before taking over. We need talented people,” he said. Appointed interim CEO.
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If his appointment becomes permanent, Boatwright said on an earnings call that he would “continue to build Chipotle into an even more iconic global brand in the coming years and months.”
Here’s what Chipotle reported in its third-quarter earnings compared to Wall Street’s expectations, per Bloomberg consensus data:
Revenue: $2.78 billion vs. $2.82 billion
Adjusted earnings per share: $0.27 vs. $0.25
Same-store sales growth rate: 6.0% vs. 6.38%
The company reiterated that it expects full-year sales growth in the mid-to-high single digits for 2024, which is higher than the previous guidance of mid-single digit growth set in the fourth quarter of the previous fiscal year. It was something.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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